The Perfect Plate – 2025 Q1
Q1 2025 presented a mixed picture for U.S. restaurant operators. While revenue growth
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Stock Highlight: CAVA
With a fresh Q3 report to look at; here are our top 3 highlights from CAVA’s 2023 Q3 Report
Revenue and Profit Growth: CAVA reported a significant increase in revenue, with a 49.5% year-over-year growth to $173.8 million. The company also saw a substantial improvement in profitability, with net income of $6.8 million compared to a net loss of $11.9 million in Q3 of 2022. This profitability is reflected in the adjusted EBITDA of $19.8 million, which exceeded the adjusted EBITDA for all of 2022.
Same Restaurant Sales and Traffic Increase: CAVA achieved a 14.1% same-restaurant sales growth, which included a 7.6% increase in traffic. This growth was noted across various regions and both suburban and urban locations.
New Restaurant Openings and Outlook: The company opened 11 new restaurants during the quarter, bringing the total count to 290. CAVA also raised its full-year guidance for 2023, expecting 70 to 73 net new restaurant openings, with same restaurant sales growth between 15% and 16%, and a restaurant-level profit margin of at least 24%.
Highlights from 2023 Q3 Earnings Calls
Looking forward to 2024: Store Growth and Automation
Chipotle – CMG
New Restaurant Openings: The company is on track to open between 255 to 285 new restaurants in the current year and anticipates opening between 285 to 315 new restaurants in 2024, with at least 80% having Chipotlane.
International Expansion: Chipotle opened its first location in Calgary, Canada, with record opening day sales. Plans are in place to improve operations in Europe and to collaborate with Alshaya Group for openings in Kuwait and Dubai
Sweetgreen – SG
Infinite Kitchen Deployment: Sweetgreen anticipates deploying 7 to 9 Infinite Kitchens into new units and 2 to 4 retrofits in 2024. The Infinite Kitchen is expected to create a more efficient assembly process and enhance the customer and employee experience.
New Store Openings: The company plans to open between 23 and 28 new stores during 2024, with the Infinite Kitchen installations weighted towards the back half of the year. The retrofits are planned for high-volume urban stores to understand how the increased throughput will translate into higher revenue and flow-through.
The One Group – STKS
The ONE Group plans to add 8 new venues in 2023, with 6 already opened by the time of the earnings call. Upcoming Openings: For the remainder of the year, they are on track to open 2 new company owned STKs in Boston, Massachusetts, and Salt Lake City, Utah.
Early in 2024, the company plans to open a company-owned STK in Washington, D.C., at the Marriott Grand Marquis, a company-owned STK in Aventura, Florida at the Aventura Mall, and a licensed STK.
Long-term Growth: The ONE Group views their addressable market as 200 STK restaurants globally and 200 Kona Grill restaurants domestically, with best-in-class ROIs of between 40% and 50%
Public Market Top 10 for the Week
The stock market has rebounded since September; restaurant stocks have also seen improvement, particularly companies at close to 52-week lows.
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Deal Making: Transaction Activity
M&A in 2023 Q4
- Authentic Restaurant Brands acquired Fiesta Restaurant Group for $220m
M&A in 2023 Q3
- FTC reportedly investigating Roark’s Subway purchase | The FTC is
concerned the deal could create a monopoly in the sandwich segment, as Roark Capital also owns Arby’s, Jimmy
John’s, and related chains.- Subway to be acquired by Roark Capital for $9B. Subway has been going through
their sales process since late 2022.
- Subway to be acquired by Roark Capital for $9B. Subway has been going through
- Bain Capital acquired Fogo de Chao for $560 million after it rapidly grew under Rhone
Capital. - Fat Brands buys Smokey Bones for $30m
M&A in 2023 Q1 & Q2
- Darden acquired Ruth’s Hospitality Group for $715m
- Mohari acquired TAO Group Hospitality for $550m
- Main Squeeze Juice Co. [Conscious Capital] acquired I Love Juice Bar’s 20 units
- SSCP Restaurant Investors bought out bankrupt Corner Bakery for $15m
Source: Restaurant Mergers & Acquisitions | Restaurant Dive
Market Update: Public Comps
Week Ending | 1/26/2024
Top 10 Monthly Price Movements
The last 90-day performance has been strong with an average of +35% for our Top 10 movers.
Top 10 Enterprise Value [EV] / NTM Revenue Multiples
The top 10 is made up of mostly Franchisor entities, which have higher multiples than company owned concepts. Consensus revenue growth forecasts estimate ~10% growth into 2024. The growth guidance is attributable to store growth and price increases.
Public Comps – Trends
Trend – Enterprise Value [EV] / LTM Revenue Multiples
The restaurant industry has seen valuations decline due to interest rate increases.
Trend – Enterprise Value [EV] / LTM EBITDA Multiples
Revenue Multiple Trends
Restaurant businesses are generally valued on multiples of their revenue or EBITDA, depending on their capital structure, growth potential, and franchise model. For example, a McDonald’s franchise has a higher revenue multiple than a company-owned restaurant chain like Shake Shack.
Here are some of the factors that affect restaurant valuation multiples:
- Capital structure: Businesses with less debt and more equity tend to have higher valuation multiples.
- Growth potential: Businesses with high growth potential tend to have higher valuation multiples.
- Franchise model: Franchise businesses tend to have higher valuation multiples than company-owned businesses.
EBITDA Multiple Trends
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